Overcoming the challenges of service charge arrears recovery

Brady Solicitors’ Annette Frost shares some practical advice for property managers who have hit a brick wall with service charge arrears recovery.

Unpaid service charges can hamper good block management and the debt recovery process can be challenging and time-consuming for landlords and managing agents, putting a huge dent in cash flow.

When it comes to successful service charge arrears collection it’s important to have sophisticated systems and processes in place that not only get the cash back into your estates quickly, but also maintain the leaseholder relationship.

When clients come to Brady Solicitors for help with recovering service charge arrears, it’s usually because they’ve hit a bit of a brick wall and their debtor lists are becoming a cash flow problem.

Putting the following questions to our clients often helps them approach service charge recovery a little differently and relieves some of the stress further down the line.

Do you know when leaseholders have paid?

It may sound simple but increasing the regularity of bank reconciliations to daily or weekly can mean that leaseholders who have paid get their payments acknowledged more accurately. They are not then chased and related unnecessary work is minimised. This can also avoid jeopardising any ‘no win, no fee’ arrangements you have in place with your legal provider.

Are your records up to date?

Accurate and up to date records should be standard best practice and it’s particularly important to keep a paper trail of events should a dispute arise. It provides timely evidence to back up your case and demonstrating good record keeping is generally rewarded at the First-tier Tribunal.

Do you know why your leaseholders are not paying their service charge?

This question can be overlooked by landlords and managing agents, but the answer usually helps to identify the best course of action to resolve the matter as quickly as possible. By picking up the phone and talking to leaseholders to determine why they haven’t paid their service charges, it encourages open communication and helps to maintain good leaseholder relations. And it of course helps with finding a solution to securing payment.

Could your credit control processes be improved?

Chasing unpaid service charges can be demanding for busy credit control teams, but these processes can usually be made quicker and more efficient. One way we’ve helped to improve credit control for our clients is to integrate their processes with Brady Solicitors’ debt recovery systems, which has resulted in a more streamlined approach and quicker cash collections.

Do you have leaseholders who are abroad?

You should always try to maintain up to date contact details for your leaseholders but with the increase in overseas investors, or leaseholders moving to sunnier climes this can be tricky. Your legal team can still pursue leaseholders who are out of jurisdiction – it may just need a bit of detective work or specialised legal expertise.

With the right legal team behind you, service charge arrears recovery doesn’t have to be such a challenge and many obstacles can be avoided by approaching situations in a more sophisticated way.

Brady Solicitors Ltd is a limited company registered in England & Wales. Company No 6524424. VAT Number 930529531 We are authorised and regulated by the Solicitors Regulation Authority to provide legal services in England and Wales. SRA Number 486971